substantially revised version published as IZA DP 2144
The effects of active labour market policies (ALMP) on individual employment chances and
earnings are evaluated by nonparametric instrumental variables based on Swiss
administrative data with detailed regional information. Using an exogenous variation in the
participation probabilities across fairly autonomous regional units (cantons) generated by the
federal government, we identify the effects of ALMP by comparing individuals living in the
same local labour market but in different cantons. Taking account of small sample problems
occurring in IV estimation, our results suggest that ALMP increases individual employment
probabilities by about 15% in the short term for a weighted subpopulation of compliers.
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